Ivy Zelman, CEO and co-founder of Zelman & Associates, speaks with “The Sherman Show” hosts Jeffrey Sherman and Samuel Lau on the state of the multifamily and single-family housing markets and her outlooks for these asset classes. Founded in 2007, Zelman & Associates provides research, analysis and advice about the U.S. housing market and related sectors to investors and business leaders. This edition of the podcast was recorded Oct. 12, 2020.

Of the various housing subsectors, single-family housing is where Ms. Zelman sees the most-attractive investment opportunities. She is not advising investors to put capital into multifamily housing.

Single-family housing is not without risks. Ms. Zelman is starting to see topping signs in some areas where builders are buying land at prices that don’t pencil out. While C-suite executives in housing-related businesses foresee “several years” of growth, she says her firm expects “year-over-year declines in existing-home sales, declines in new-home sales and housing starts” in 2022. “Builders right now are aggressively raising prices. They’re buying land more aggressively. And it just feels like something could go wrong. But the whole contingency is rates, in my opinion. Rates stay low, we’ll probably start to see some relative slowing in 2021 or 2022, but the builders might push too far in price, and that could slow things down even faster.”

Ms. Zelman warns that some investors are acting on a bullish big-picture view without understanding “the local market dynamics. There’s plenty of bad investments being made because they’re just assuming that everything is sort of universal,” and they’ll “have the benefits of the overall market – and that’s just not the case.”

Ms. Zelman draws a sharp contrast between extremely tight single-family inventories and overbuilt multifamily inventories as well as the demographics of those subsectors.

The inventory of single-family homes for sale as a percentage of total households is about 1.2% versus a 30-year average of 2% and a peak of 3.5% during the Great Housing Bust. “That’s one of the reasons we thought, even in a great recession that we were faced with in March, that home prices could still increase – even in the face of double-digit unemployment. But now what we’re seeing is that despite unemployment being so high, with so many people being able to work remote, having their kids at home, learning online, they have a lot more flexibility and a lot more options. So the states that have been the winners are growing even more than they had been because of this new dynamic.”

The inventory for multifamily housing,” she notes, “is now in backlog at an all-time, multidecade high. That was prepandemic. Now we layer on a substantial recession, and we look at urban cities that are hit the hardest, and people can work remote. And you’re seeing that supply is still there and still going forward. I think it’s kind of been a nightmare for those urban multifamily owner-operators that are dealing with so many headwinds that were prevalent pre-COVID.”

Among those headwinds, she notes, is a demographic shift. The primary demographic cohort for multifamily housing comprises people between the ages of 20 and 34. The growth rate of this population is slowing and will turn negative in the second half of this decade. As people enter the 35-to-44-year cohort, they form couples, have children and migrate to single-family homes.

The movement toward work from home, while accelerated by shelter-in-place regimes due to COVID-19, marks a durable shift in the use of housing, according to Ms. Zelman. This change, she says, will add more momentum behind a years-along movement out of urban centers to suburban and exurban areas as well as from states with higher housing costs and taxes to states with more affordable housing markets, lower taxes and more favorable climates.

Ryan Simonetti, CEO and cofounder of Convene, joins “The Sherman Show” to discuss the future of commercial real estate, particularly in the office and hospitality sectors. Convene designs and services premium places to meet and work. Founded in 2009, Convene has transformed the workplace and meeting place by bringing together trends in technology, service and amenitization, which is the lifestyle movement that transformed hotels and luxury fitness clubs.

Convene also set out to provide businesses with a more-flexible and better-aligned real estate model. Key to Mr. Simonetti’s approach was to provide businesses “access” to workspaces without the need to own them or enter long-term leases. The ownership/long-term lease model, he realized, leaves companies with either too much or too little real estate. “If I was a company,” he notes, “would I rather design, build and manage all of my own hospitality space, my own meeting event and conferencing facilities that I use a few times a year? That’s not really my core business. Do I want to lease an extra 50,000 square feet of space that I may or may not need? Or do I want to sign a 10-year lease when I’ve only got a business model that gives me visibility for the next 18 to 24 months? … [I]t’s a shared consumption model, right? It’s outsource over insource; it’s shared infrastructure over owned infrastructure, and I believe pre-COVID and then coming out of COVID, access is the new ownership.”

Due to the COVID-19 pandemic, Convene, like many firms, had to close its locations in the U.S., and plans to open operations in the United Kingdom have been postponed. The process has been a tough one, but Mr. Simonetti and his team used the opportunity to reassess their strategic vision of the future of their economic sector.

“We had to close our entire portfolio in early March,” Mr. Simonetti tells podcast cohosts Jeffrey Sherman and Samuel Lau. “We’ve only chosen at this point to open up a portion of that portfolio. And we had to make all the really tough and hard decisions that companies that are, you know, I think kind of at ground zero of this crisis have had to make around cost cutting. And I’m sure for you guys, even as leaders, like the hardest conversations to have are the human ones. And this has been really, really tough on our team and our leadership team. But I’d say the hard part for us is over. We had a strategy called Survive and Thrive when we started, and I’d say the first 90 days was really about survival and doing the hard stuff like cutting costs and closing locations, raising capital restructuring deals that we had with landlords.

“And the last, I’d say, 90 days has been this amazing opportunity that I think most companies never get, especially at our stage. I mean, we were high flying about to do a pre-IPO around growing 60-plus percent a year. When do you ever get to take a giant step back and really question everything you’re doing and you just don’t? And so I think what we’ve done is really taken this as an opportunity to really ask ourselves in a post-COVID world, knowing that there’s going to be new challenges and new opportunities, where do we really strategically want to take the business? What are the core competencies and capabilities that we can leverage knowing that although the world is not going to be radically different, it’s going to be different enough that we need to think different? And where are the opportunities where we can invest in innovation to really position us while moving forward? And I’m really appreciative of our team and our board for not letting a good crisis go to waste, and I think have really positioned the company to be successful coming out of this.”

This podcast was recorded on Sept. 29, 2020.

Veteran investment executive Katie Nixon joins Jeffrey Sherman and Samuel Lau on “The Sherman Show” to discuss the ways in which her client-facing background as a portfolio manager informs her work as a chief investment officer, how meeting a client’s goals isn’t limited to maximizing wealth and tax strategies for wealthy Californians, among other topics. Ms. Nixon is an Executive Vice President and Chief Investment Officer for the wealth management business at Northern Trust. Private Asset Management in 2016 named Nixon one of the “50 Most Influential Women in Private Wealth.”

Ms. Nixon says that she looks at her work as a CIO through the lens of a client and that developing a strategy isn’t just an academic exercise for her. Dealing with people’s money is a huge responsibility. While it’s relatively easy to be empathetic and build relationships when times are good, it’s when things are rough, like in today’s investment environment, that you really need to turn on that empathy quotient. You have to get into the mind of a client to understand what they are going through. Turning back to the Global Financial Crisis, she recounts a coworker telling a client that “this is a three-standard-deviation event,” an explanation that provided no comfort or clarity.

Also in regard to her background as a portfolio manager, Ms. Nixon says she thought for her first two decades that “every client’s goal is more.” Maximizing wealth, she learned in 2008, is not a goal. Using “maximize wealth from a risk-adjusted perspective” is a very inadequate way of managing private wealth. This led her to focus at Northern on designing client portfolios around personal outcomes rather than an amorphous maximized wealth target. Some goals require a lot of risk; some don’t.

In response to Ms. Nixon’s reference to fees and tax efficiency for private clients, Mr. Sherman brings up a proposal in California to hike taxes on millionaires and asks if the best strategy is to leave for those who reach that strata of income. Ms. Nixon says that Northern goes through a regular exercise with clients who live in California and New York over the substantial financial impact of residency in those states. While there is a math side to the equation, there is also the impact of deciding “I have to move.”

Before wrapping up, Mr. Lau asks Ms. Nixon if she has any career guidance to share. Find something you really love and, on the practical side, find a mentor, advises Ms. Nixon, who credits the secret to her success to having strong mentors around her who advocated for her.

DoubleLine’s Jeffrey Sherman and Sam Lau welcome Daniel Crosby, a psychologist and behavioral finance expert, to “The Sherman Show” to discuss what roles education and experience play in investment decisions and how automation can counter an investor’s worst impulses. Mr. Crosby is Chief Behavioral Officer at Brinker Capital and is the author of several books, including “The Behavioral Investor” and “You’re Not That Great,” and coauthor of the New York Times bestseller “Personal Benchmark: Integrating Behavioral Finance and Investment Management.” The podcast was recorded July 20, 2020.

Mr. Crosby wastes no time in establishing a theme for the episode with his response to the most recent University of Michigan Consumer Sentiment Index survey, which was below expectations. “Asking people how they feel is effectively useless,” he says in regards to the creation of the Irrationality Index. “People are really poor predictors and poor descriptors of their own behavior.” Mr. Crosby cites a recent study that says your coworkers are much better than you are as descriptors of your personality and predictors of your behavior. With his index, instead of asking consumers and CEOs how they felt about things, Mr. Crosby combines data points on how people actually behaved to put a number on how irrationally exuberant or irrationally fearful people were at any given moment.

While Messrs. Sherman, Lau and Crosby agree there is no substitute for experience, they all share examples of the risk of drawing the wrong lessons from a particular event, with people tending to overrate their abilities. Mr. Lau points to the traders who are quick to share how they timed the markets to perfection but never disclose their missteps. Mr. Crosby references a study in which the correlation was basically zero in how investors recalled their behavior and how they actually behaved.

Mr. Sherman asks why this disconnect seems to be a fundamental part of being human. Mr. Crosby says that there are two factors influencing people’s behavior. One is “rosy retrospection,” where people look back on events that weren’t that great, like a hectic family vacation at Disneyland, and only remember the moments that were positive. At the same time, human brains have an outsized stickiness for emotion-inducing negative events and are prone to hold on to the most-negative things that happen in order to steer people away from enduring them again.

In order to counter investors’ negative impulses, Mr. Crosby uses the three T’s: training, tools and technology. These factors are combined with the goal of providing “just in time” advice to prevent bad decisions in a time of panic. Personal advisers and automation of investment decisions are vastly superior to trying to educate oneself into a “willpower warrior” to take on the markets, he says.

In a tour d’horizon of markets, macro and monetary mavens, returning guest Danielle DiMartino Booth joins DoubleLine’s Jeffrey Sherman and Samuel Lau to survey the landscape post-COVID-19. This episode was recorded July 10, 2020. Ms. DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence. A former official of the Federal Reserve Bank of Dallas, she is author of the critically acclaimed book “FED UP.”

Ms. DiMartino Booth sees trouble for the economy in the latest producer price data print, crushed corporate profit margins and the frozen state of the credit cycle. For those who have been hoping for a V-shaped economic recovery in the U.S., she warns, “The second side of the V is going to be shallower as we veer into W.” Confirming reports of this expectation should appear in the regional Federal Reserve surveys.

Income inequality amid today’s economic hardship, the guest and the hosts note, could lead to a Democratic sweep of November elections, which would represent a watershed for the government’s agenda and central bank policy. “If you push the inequality divide too far,” Ms. DiMartino Booth says, “you’re going to end up with a sufficient mass of votes who want to bring in Modern Monetary Theory, who want to have universal basic income.” That in turn could lead to a rapid doubling of the federal debt and the reprise of inflation.

Among other topics, Ms. DiMartino Booth says that heavy levels of corporate debt amid skyrocketing bankruptcies pose another long-term threat to the economy, particularly in the retail sector. “Bankruptcy doesn’t mean what it used to mean because companies are so levered up that there’s not enough value that they can pull out and come all the way through restructuring and maintain the same footprint, … the same headcount,” she says.

What does Ms. DiMartino Booth believe investors might be overlooking or underappreciating? One area is the excess supply in the lodging sector, in particularly in full-service hotels and luxury apartments in central business districts. Much of this overbuilding, she notes, was financed by private equity and single-asset, single-borrower debt, a “wicked risky” asset class that did not exist a few years ago and in 2019 accounted for 47% of the issuance of commercial mortgage-backed securities. “Pensions, endowments, life insurance companies – inappropriate investors – have piled into this asset class,” she says.

Where might opportunities lie? “For people who understand office [property] and have dry powder,” she says, “I think there will be some historically amazing deals that get done on the cheap.”

Bob Brinker, founder and publisher of the Marketimer Investment Letter, comes on The Sherman Show to discuss “Quantitative Easing Infinity” under Federal Reserve Chairman Jerome Powell, the consequences of a Biden versus Trump election victory for the federal deficit, “free money” in times of negative interest rates, his investing concept of “critical mass” and other topics with podcast hosts Jeffrey Sherman and Samuel Lau. The podcast was recorded July 8, 2020.

Now in its 35th year and listed on the Hulbert Financial Digest Investment Letter Honor Roll, Marketimer covers the economy, Federal Reserve Policy, technical analysis of the markets and market timing. Among Mr. Brinker’s outlooks is the idea that as long as real interest rates remain negative, the Federal Reserve will continue to buy the U.S. government’s debt. “The question here is going to be whether interest rates are going to stay near zero forever, which would, by the way, accommodate Modern Monetary Theory because, what the heck – if you don’t have to pay for the money, who cares?” Mr. Brinker tells Messrs. Sherman and Lau. “That’s where we are right now in my opinion…. The reason Modern Monetary Theorists are getting away with this right now is because we’re not paying for the money. The real interest rate on the 10-year Treasury is negative. So we’re getting paid to borrow in real terms, which is a good way to borrow if you can figure it out.”

Of course, how long rates can stay negative in inflation-adjusted terms is the open question. “Where does this all come to, one way or the other? Interest rates,” he notes. “If we ever get into a situation where interest rates go up, you do the math, the interest on the national debt is going to be a really big number. That is going to drive whether Modern Monetary Theory has legs or not.”

Asked for a few of the most valuable lessons from his long career investing in securities markets, Mr. Brinker replied, “The most important thing is to keep emotion out of your investment decisions. That’s what we did this year – well, we always practice this, but we showed that this year when we maintained our fully invested position even though there was that very brief panic in March. We maintained our fully invested position; we told our subscribers to dollar-cost average additional money into the market as they wished. And look what’s happened in the market. The market is back near all-time record highs.”

Ed Hyman, Chairman of Evercore ISI and head of the firm’s Economic Research Team, shares with DoubleLine’s Jeffrey Sherman and Samuel Lau the macroeconomic insights he believes are most relevant to investors at this time. This episode of The Sherman Show was recorded June 29, 2020. With inflation a no-show on the foreseeable investment horizon, Mr. Hyman is focused on three variables, all of which are global: fiscal and monetary stimulus, the COVID-19 pandemic and the economy. In his view, the massive quantity of stimulus “has the upper hand over the virus,” although he warns that the possibility of more lockdowns cannot be ruled out. In response, Mr. Sherman notes, “It seems that the market has ignored the increase of the virus as of late and seems to really be focused on what you’re talking about: this commitment to keep things going, to keep the economy going.”

Among other topics, Mr. Hyman and the hosts discuss behavioral shifts caused by the pandemic and government measures in response. “I assume that working in an office will be less attractive for a long time, and working from home will be more attractive,” Mr. Hyman says. “So house prices away from downtowns are going up.” He is optimistic about the prospects for an effective COVID-19 vaccine next summer. Modern Monetary Theory (MMT), the idea that governments can create an economic free lunch by issuing debt for purchase by their central banks, also comes up. “Most of the MIT guys or the Harvard guys find MMT to be pretty lacking in credibility,” Mr. Hyman says. “But it seems to me as a practical matter, it definitely has the upper hand at the moment. It just seems like there’s no limit to monetary or fiscal stimulus initiatives – as long as it seems that there’s a need for them.”

Mark Zandi joins DoubleLine’s Jeffrey Sherman and Samuel Lau to discuss, among other topics, if June’s recovery means an end to the recession, what shape the next federal fiscal package might take, the fallout from layoffs possibly spreading into higher-wage jobs and the economic outlook for the second half of 2020. Mr. Zandi is the Chief Economist for Moody’s Analytics. The podcast was recorded June 25, 2020.

Mr. Zandi says a June end to the recession would make the three-month recession the shortest on record as the typical recession lasts nine months. But, Mr. Zandi notes, it would also be the most severe, with a peak-to-trough decline in GDP on a monthly basis of 12% to 14%, contrasting to a peak decline of 4% during the Global Financial Crisis. And while he says that he did feel the long post-Global Financial Crisis expansion was leading to the preconditions for a recession, with the chances for one in 2020 likely, the COVID-19 blow to the economy was unprecedented.

Messrs. Zandi, Sherman and Lau speculate on what further fiscal aid might be coming from the U.S. government, with the Federal Reserve having firmly passed the baton to Congress. Mr. Zandi says three things need to happen: The package has to be at least $1 trillion, with his number rising in the face of the re-intensification of COVID-19; it has to happen before the August congressional recess, with the $600 boost to unemployment insurance set to expire at the end of July; and half of that $1 trillion has to go to state and local governments.

Mr. Zandi says housing has held up remarkably well in the pandemic, bolstered by the government agencies. The other surprise is the stock market, supported by the performance of very large companies. He sees one of the longer-term impacts of the pandemic being the concentration of business activity into the hands of fewer companies across all industries. “The stock market is now a market for winners,” he says.

In terms of risks for the second half of 2020, Mr. Zandi sees the continuing lack of leadership in handling the pandemic as incredibly disconcerting. He also expects November’s presidential election to be “really ugly,” with COVID-19 impacting voting procedures and a nightmare scenario playing out if there is no clear winner on election night.

Sean Trende joins DoubleLine’s Jeffrey Sherman and Samuel Lau to discuss, among other topics, the use of aggregate polling to forecast election results, the challenges in creating accurate sample sizes in the era of the cellphone and internet, how personal biases impact not only how data models are interpreted but how the models are built and what COVID-19 might mean for November’s election process. Mr. Trende is the Senior Elections Analyst for news website RealClearPolitics. The podcast was recorded June 18, 2020.

Mr. Trende says the aggregation approach used by RealClearPolitics in its tracking of political polling is an advantage over single-sample polling, and the news site’s averaging methods promote transparency. He notes the difficulty of creating accurate polls when “everybody lies about voting and going to church.”

Mr. Sherman raises the issue of how to accurately capture public political sentiment considering the difficulty pollsters must have in getting people to respond to an unknown caller ringing their cellphones. This leads to a discussion among Mssrs. Trende, Sherman and Lau about the challenges of modeling in the worlds of politics and finance with a comparison made to recent questions about unemployment data. Mr. Trende says models using online polling still have a way to go.

Mr. Sherman wonders what the blown predictions that “remain” would carry the day in the Brexit vote means for the reliability of voter polling. Mr. Trende responds that the polls were accurate, and it was the analysts who blew the call, revealing their political biases. They talk about the problem of confirmation bias in modeling and reporting an era in which news consumers can filter out information they find disagreeable. Mr. Trende found this out personally in 2016 when he was savaged online after writing an article about data pointing to a possible Trump victory in November.

Mr. Trende sees Democratic candidate Joe Biden with a big lead today in the national popular vote, but there is still time for President Trump to rebound in the electoral vote by Election Day.

David Rosenberg joins DoubleLine’s Jeffrey Sherman and Samuel Lau to share, among other topics, his view on the (dim) prospects for a sustained V-shaped recovery; his choice of indicators for how the economy is progressing; the 10-year divorce between the U.S. economy and stocks; and, beyond the COVID-19 crisis, a future of stagflation. Mr. Rosenberg is the President and Chief Economist & Strategist of the economic consulting firm Rosenberg Research & Associates Inc. The podcast was recorded June 8, 2020.

In regard to his near-term view of the markets and the economy, Mr. Rosenberg argues, “The stock market and the economy became divorced a decade ago.” The rally off the March low, he says, “is all about Fed-induced liquidity.” “We have a lot of hopes over a vaccine,” he says. “Maybe the ‘V’ recovery stands for ‘vaccine.’ But let’s face it: This is the mother of all liquidity rallies that we’ve ever seen.” To illustrate, he cites M2, an important Fed measure of the size of the U.S. money supply. He notes that the Fed has boosted M2 by $2½ trillion since mid-March. “And what do you know … the market cap of the S&P 500 has gone up in that same time period by $2½ trillion.”

Mr. Rosenberg expects the economy, as measured by conventional economic metrics and data points, to stage a “reflexive rebound” in the months ahead with the turn in the weather and all 50 states out of lockdown. “The question is, beyond the third quarter, will it be prolonged? And that’s going to be dependent on demand,” Rosenberg says. Rather than looking at coincident indicators, he advises watching spending intention surveys and consumer confidence. He was unimpressed by the prior week’s positive nonfarm payroll report, which was fraught with reporting irregularities and other problems. The critical determinant for demand, he says, is the timely arrival of a vaccine or effective treatment.

Over the long term, Mr. Rosenberg sees no return to the state of the economy pre-COVID-19. “There is no such thing in this business as a get-out-of-jail-free card,” he says. “This is only a business of Newtonian physics where every action has an equal and opposite reaction, but there are lags.” At some point in the future, he expects aggregate to stabilize, and “we’re going to be left with a regulatory, (flatter) world and shrinking globalization that is going to mean cost-push inflation, and localized supply chains taking precedence over globalized supply chains. The corporate cost curve is going to look different, and the aggregate supply curve is going to be looking a lot more inelastic or sclerotic than it has in the past. So, we’re going to supply-side inflation. We’re going to have a form of stagflation in the future.”